In a typical syndicated credit facility, the lenders are generally prohibited from assigning their rights and obligations under the credit agreement without the borrower’s consent (typically not to be unreasonably withheld) unless the borrower is in default of its obligations under the credit agreement or the assignment is made to an existing lender, an affiliate of a lender or a non-natural person that meets certain other specified criteria¹ (each such person, an “Eligible Assignee”). Many credit agreements provide the borrower with additional rights with respect to assignments; for example, by giving the borrower a consent right to lender assignments at all times other than if a payment or bankruptcy event of default exists, by prohibiting assignments to competitors of the borrower or its financial sponsor (if relevant) regardless of whether a default exists, by permitting assignments of term loans to the borrower’s debt-fund or other affiliates, by allowing term loan buy-backs by the borrower or by omitting any “deemed consent” provisions where the borrower’s failure to object to a request for an assignment within a short time frame constitutes consent. The nature and extent of any such borrower rights, and the degree to which lender participations are similarly restricted, will depend on many factors, including the borrower’s credit profile, industry, whether a financial sponsor is involved, general market conditions and the administrative agent’s and initial lenders’ preferences and policies.

One of the key underlying tensions in negotiating lender assignment provisions is balancing the lenders’ desire to maximize the pool of potential assignees in the event a lender needs to liquidate its position to manage its loan portfolio or otherwise, and the borrower’s desire to manage the identity and number of its lending partners and maintain the confidentiality of its proprietary information, particularly from the borrower’s (or its sponsor’s and...